After this short introduction let’s look at each of these steps in more detail.

1. Make a stock investment plan

The first step before you make stock investments should be making a plan, which involves several basic questions you should think about.

The three main factors you need to consider before investing in stocks are:

Goals: What is your objective, stock investment?

Time: How much time do you plan to spend on this activity?

Risk: Are you OK with high risks or do you prefer to worry less?

Know the answers to these questions will put you on the right path to invest in stocks. It will help define which kinds of products and stocks are the best fit for you based on your investment goals, time commitment and risk profile, or whether stocks are for you at all.

Are stocks for you?

Last, let’s look at whether stocks are the right investment for you, or if you should focus on other types of products.

Regarding risk, a good rule of thumb to follow is this: If you lost 20% in a week, how badly would that affect you? If that is too much and you don’t think you would be able to handle it, then stay away from stocks and invest instead in some less risky assets, such as short-term U.S. government bonds, for example. If, however, you would be OK with this kind of short-term loss in the hope of long-term gains, then go ahead, stocks are right for you.

Diversify your portfolio

Risk: If you put all of your savings in just one or two stocks, and the company you selected goes bust, you could lose all your invested money.How to manage it: Diversify your investment portfolio. This practically means buying many different stocks and not putting all your eggs in one basket. The ideal number of stocks in a portfolio ranges somewhere between 20 to 30. Alternately, you can also invest in ETFs or mutual funds, which are a natural, simple form of diversification.

Other questions to consider and explore

2. Choose an online stock broker

If you’ve decided on what type of product you want to buy to invest in stocks, you need to open an account at a brokerage firm. But which one? Today there is a wide array of choices available for all kinds of brokers, be they traditional brick-and-mortar companies with offices, or online broker firms. Each brokerage has its own strengths and weaknesses, different fee structures, product offering, trading platform, research and learning tools, and so on, so the choice can be a difficult one. You can learn more about the different types of brokers at our dedicated page on stockbrokers and other types of brokerages.

Thankfully, Brokerchooser is here to help you: we started our service just for this purpose, so based on your preferences, we can recommend the right broker for you. We cover only safe brokers regulated by financial authorities, so you don’t have to worry about running into scammers. To get a free, personally-tailored recommendation by answering a few questions, just click on the button below.

Avoid investing with scam brokers

Risk: Unfortunately, there are many scam online “brokers” are out there trying to steal your money. When you see ads for binary options trading or automated investment algorithms that generate outstanding returns, start to get very suspicious. In these cases, the best thing to do is to ignore these ads.

How to manage it: When investing in stocks online, go with our selection of safe, verified brokers. We have an active account with the brokers we selected and we test them regularly.

Want to stay in the loop?

Sign up to get notifications about new BrokerChooser articles right into your mailbox.

Error

First name

Email address

I acknowledge that my information will be used in accordance with the
Privacy Policy
and
Cookie Policy
By continuing you will receive brokerage related emails. You can unsubscribe any time from within the email.

3. Open and fund your account

Once you’ve selected the right broker for you, you need to open an account. This account will handle all your money, as well as all of your investments, such as stocks, funds, bonds, etc. The account opening can usually be done online and may take anywhere from a day to several days. You will also need to fill out various identification forms, so have your documents ready.

After opening your account, in order to start investing in stocks, you will need to deposit money to the account, which is also referred to as funding your account. Depending on the broker, this can be done via bank transfer, credit card, or even electronic wallets like Paypal or Apple Pay. Some brokers also set a minimum amount that you have to deposit to start trading, so keep this in mind when making the transfer.

Tip: Open a demo investment account

Many online brokers offer demo accounts, where you can try out how buying and selling stocks works, without risking any of your actual money. These accounts and trading platforms look the same as the live ones, but no actual transactions are carried out on the open market - the deals are only virtual. It's a useful tool for getting to learn the details of stock trading in demonstration mode, before jumping into the market with your hard-earned savings.

To learn more about broker deposits and compare brokers, follow the link below:

4. Buy the stocks

With your investment strategy ready, and your account opened and funded, all you need to do now is buy the stock that you have selected. Trading platforms usually have a search function to help you with this process. Taking into account how much money you have and the price of the product, enter how many shares you want to purchase and press ‘Buy.’ Congratulations! You have now made your first investment and are the proud owner of a stock.

When placing an order, you can choose from different order types. A market order buys immediately at the current market price, while a limit order allows you to specify the exact price at which you want to buy the shares.

Avoid crappy stocks

Risk: when buying individual stocks, there is always a risk of selecting the wrong ones. This could mean anything from a company that inflates its potential, actually defaults, or just buying an overpriced stock.

How to manage this risk

Learn: This is the tricky part, since you need some knowledge and experience to learn which stocks to invest in. The best is to start learning by reading books on investment and taking online courses. There are tons of great books out there, but you can start with Intelligent Investor by Benjamin Graham. This is also the book on investment most recommended by Warren Buffet.

Gather information: While you are learning, start collecting as much information about your target companies as possible. Read about them, understand their business profiles, start going through their income statements, gain some knowledge about their management or even attend their annual meetings. These will help you get a better understanding of the company and the specific industry.

Compare multiple: When it comes to pricing, use industry multiples as a benchmark for your target stock. P/E is a basic multiple, but each sector has its own favorite.

5. Regular review of your investments

After the initial purchase is done, you can start building or changing your portfolio by buying new products or selling them in order to reap the profits (or cut losses). This is called portfolio management, and is usually a necessary part of investing. Although it is possible to buy just once, lie back and hope that you made the right choice and you will be a millionaire years later when you retire, it is not the general experience. For short-term buyers, position management could mean setting up the stop-loss price of where to cut losses, and the target price of where you want to sell the shares with a profit.

A good investor keeps an eye on market movements, how economies are doing, which sectors are booming and which are struggling, and adjusts his or her strategy and makes investment decisions accordingly.

Even if you are a long-term investor, you should review your assets a couple of times a year at least. If you are satisfied, then you can leave things as they are, but if you want to make changes you should. If you are unsure, don’t be afraid to ask for advice, either from an advisor at your online broker, or by doing some research yourself, watching online videos, or educating yourself via investment courses.

Now that you have passed our investing in stocks 101 course and mastered the 5-step guide, take a moment to look at the top 5 brokers we have selected for you.

The top 5 brokers for investing in stocks

If you're a beginner just starting to explore how to invest in stocks online, we recommend that you choose one of the following five brokers. We tested all five, and we have live accounts with all of them:

Robinhood

DEGIRO

eToro

Saxo Bank

Charles Schwab

When recommending an online broker, we take into account the broker’s fees, trading platform, accessible markets to trade, and how easy it is to open an account.

Safety is also very important, but since we recommend only safe brokers, you don't have to worry about this. In our recommendation below, we considered the broker's geographical coverage as well, so you will find some brokers that are more US-focused, some that are more active in Europe, as well as ones that are all-around global players.

The best brokers to invest stocks at - Comparing some key characteristics

Robinhood

DEGIRO

eToro

Saxo Bank

Charles Schwab

Broker intro

US zero-fee discount broker

Dutch discount broker

Global social trading broker

Danish investment bank

US discount broker

Award

Best for beginners

Best discount broker

Best social trading

Best trading platform

Best research

Overall score

4.1

4.7

4.5

4.7

4.6

Fees score

4.0

5.0

4.0

3.0

4.0

Markets and products score

1.0

3.0

3.0

4.0

3.0

Account opening score

5.0

5.0

5.0

3.0

5.0

Web platform score

5.0

4.0

4.0

5.0

4.0

Due to local market regulations or the coverage offered by brokers, not all services of all online brokers are available in every country. For online brokers that are definitely available in your country, check out our broker finder. If fees are at the top of your agenda, you will also enjoy digging into Brokerchooser's ultimate brokerage comparison table.

Robinhood

Robinhood is a US zero-fee or discount broker established in 2013. If you don't know what discount broker means, read this overview about the best discount brokers in 2018. Robinhood is considered safe because it is supervised by FINRA, the US regulator and provides a maximum of $500,000 investor protection including a $250,000 limit for cash.

DEGIRO

DEGIRO is a trending Dutch online discount broker. It is privately owned and was established in 2013 by former employees of another brokerage company. DEGIRO is considered safe as it is regulated by top-tier financial regulators, the Dutch AFM and DNB. It is registered with the Chamber of Commerce and Industry in Amsterdam under number 34342820.

eToro

eToro is a well-known fintech startup, an Israeli social trading broker established in 2007. eToro serves UK clients by an FCA regulated entity and Australians by an Australian entity. All other customers are served by a Cypriot entity. eToro is not listed on any exchange, does not disclose its annual report on its site and does not have a bank parent. It is also one of the 5 best trading platforms for Europeans.

Saxo Bank

Saxo Bank is a Danish investment bank providing online trading and investments. It is a leading European retail brokerage innovator. Saxo is privately owned, established in 1992, and headquartered in Copenhagen. Saxo is considered safe as it is regulated worldwide by more than 10 financial regulators, including top-tier regulators, like the UK FCA.

Charles Schwab

Charles Schwab was founded in 1971 and it is one of the biggest US-based discount brokers. It is regulated by top-tier regulators, like the US SEC or the UK FCA. Charles Schwab is considered safe because it has a long track record, is listed on a stock exchange, has a banking background, and is regulated by top-tier regulators.

Bottom line

In summary, stocks are very good investments, especially on the long term. It is definitely worth learning more about the process before diving into it, however, for which we have assembled a short list of easy-to-follow steps.

Follow these simple steps to learn more about how to invest in stocks:

Make an investment plan

Choose an online broker

Open & fund your account

Buy the stocks

Review your portfolio and plan

If you follow these guidelines, you will find the process much easier and realize that it is not so scary at all. Start right now, just take the first step and try it out yourself. Welcome to the world of investing!

Gergely Korpos

Co-founder, CPO

Author of this article

Gergely is the co-founder and CPO of Brokerchooser. His aim is to make personal investing crystal clear for everybody. Gergely has 10 years of experience in the financial markets. He concluded thousands of trades as a commodity trader and equity portfolio manager.

Everything you find on BrokerChooser is based on reliable data and unbiased
information. We combine our 10+ years finance experience with readers feedback.
Read more about our methodology

About

Discover

Follow us

Disclaimer:
By trading with securities and derivatives you are taking a high degree of risk. You can lose all of
your deposited money. You should start trading only if you are aware of this risk.
BrokerChooser.com does not provide any investment advice, we only help you to find the best broker for
your needs.

Advertiser Disclosure:
BrokerChooser is free for everyone, but earns a commission from
some of the brokers.
We get a
commission, with no additional cost to you. Our recommendations and rankings are based on our
methodology, independent from partnerships we have. Please use our link to open your account so that we
can continue to provide broker reviews for free.